With a wide range of start-ups from Bristol in Bath making waves in recent years, the region has been drawing eyes as one of the UK's next tech hotspots.
A recent UKTN report undertaken in partnership with international law firm Womble Bond Dickinson (WBD) and Lloyds Bank highlighted the strengths, challenges, and opportunities found within the region.
Of note, cross-organisational initiatives such as the West of England Combined Authority-backed START accelerator programme and the South West Investment Fund are just some examples of what organisations can become involved with in the region.
But what can businesses do to maximise opportunities in the South West? And what should they be doing to try and ensure talent remains in the region?
WBD hosted a discussion at the firm's Bristol office on the Bristol and Bath tech scene and what companies of all sizes need to find investment within the region.
Delivered in partnership with UKTN and Lloyds Bank, the event was hosted by UKTN senior reporter Oliver Hornstein and featured Alastair Mitton, a partner in WBD's digital team, Gayle Bowen, investment director at investment service Wealth Club, and Rafi Khan, investment manager at Maven Capital Partners.
1. Regional strengths influencing sector growth, but currently facing a branding problem
There is no doubt that the region plays host to a wide range of businesses which are quickly turning into sector leaders – with particular strengths in telecoms, advanced materials, Green tech, and health tech, Bristol and Bath is pushing into the conversation as a national leader in the tech sector.
However, despite the growth in the sector, investment in the region remains a challenge – with businesses looking to get their foot in the door often needing to court London investors which raises not only additional expenses, but highlights the fierce competition in the nation's capital.
Alastair Mitton said:
"The region has a slight bit of a branding problem as we've traditionally been very averse to shouting about ourselves and our achievements which we should be doing, meaning we can lose ground to other regions which promote themselves better.
However, if we can find a way to amplify those successes, it will only help to increase the focus on the region from an investment view while also solidifying Bristol and Bath as leaders in the areas where we are strong.
This amplification could take many routes; we've often advised businesses of how best to support and sustain their growth across both emerging technologies and the legal ramifications, but also by tapping into our wider international network to facilitate wide-reaching partnerships and discussions which can drive investment and collaboration forward not just within the region, but on a much larger scale."
2. Better a culture of competition or one of collaboration?
While a culture of collaboration can drive forward shared outcomes, build a united regional approach and fulfil a wide range of needs for modern industries, one only has to look at America's Silicon Valley to see how a culture of competition can foster development, talent recruitment, and reputation as a world-leading tech hotbed.
Data from the UKTN report into Bristol and Bath indicates the region is one which is rich in collaboration, but is that the right path the region should follow?
The region is facing a number of key challenges which can be spotted across the entire country – rising costs of living impacting staff retention and expensive office spaces causing additional pressure on new start-ups are just some examples – which could bring the region's sector to a competitive boiling point as they work to adapt.
However, organisations within the region are working hard to relieve that pressure through a collaborative approach, with incubators including the University of the West of England's FutureSpace and Unit DX and DY from Science Creates providing specialist space at sustainable costs while also allowing businesses to come together and share knowledge more openly, pushing forward developments in the region.
3. London's proximity a 'double-edged sword'
With central London less than two hours from Bristol via train, closeness to the nation's capital is both a blessing and a curse when it comes to building a strong, resilient sector.
On the one hand, it's much easier to attract potential investment opportunities from the city given the infrastructure between Bristol, Bath, and London, meaning discussions and offers can be expedited compared to other regions at a similar stage of tech incubation.
However, there is a significant risk that the area can quickly morph into the equivalent of a feeder club for existing London businesses – vacuuming up talent in the region by providing higher salaries and room for development than can be found on the banks of the Avon.
4. Is more needed for early stage investment in the region?
One of the biggest challenges facing the entire tech sector is investment at a level where businesses can get a foot in the door. Securing funding was one of the largest challenges faced by businesses in the region according to the report, with demand for more public-private partnership funding and investment into digital infrastructure also two significant financial demands for Bristol and Bath.
But how does this problem get addressed? The South West Investment Fund (SWIF) could be one key fundraiser for businesses in the region, with £200m committed to funding smaller businesses, but there remains a big question of whether enough is being provided for businesses at the earliest levels of development and if there is, how to ensure they are signposted to opportunities within the region.
Rafi Khan said:
"I think in terms of the options currently out there, there are very few who are offering investment to those at the earliest stage of their journey. SWIG Finance manages an element of SWIF, aimed at supporting business at this stage, and there are some others (particularly CDFI’s) that tend to work on a more case-by-case basis to see if they can lend something by taking a more human approach.
There definitely needs to be more done in the area and I think that's something that can build over time as more people collaborate together; you look at LinkedIn and people are out there asking for those options and what is out there, it's partially a case of signposting those options correctly."
5. Timeframes for the investment process expanding
However, it has to be noted that for businesses seeking investment, not just in Bristol and Bath, but wider as well – the lifecycle of an investment opportunity is growing longer and longer.
As investors look to take a more risk-averse approach thanks in part to changing global market forces, this has the knock-on effect of causing the process to reflect that approach – with due diligence taking a deeper and more sustained look into various areas, dragging out the time from initial contact to offer accepted.
Gayle Bowen said:
“When we appraise investments we put in the same effort and due diligence on the small deals as we do for the larger ones, therefore to make it economically viable for us we tend not to look at deals where we invest less than £500k.
The whole process from meeting management to reviewing the plan all the way through to completion can take around 8 to 12 weeks. Once we have completed our initial investment we continue to work with the company to review trading performance and progress against key milestones. Our relationship with the Company remains in place until exit."
If your business is interested in attending WBD events, please contact our team at events@wbd-uk.com to register for upcoming sessions.
